1998 (8) TMI 593 - SC - Companies Law

Whether the State Government is empowered to collect differential supervision charges with retrospective effect under Section 58-A of the Bombay Prohibition Act, 1949? Held that - On a rational interpretation of the relevant conditions and provisions, the petitioners were entitled to know in advance the costs payable by them so as to enable them to fix the price of goods, and the respondents, having acted in the manner and permitted to the petitioners to sell the goods on the effective representation that the cost of supervision charges for incoming quarter was fixed for the said quarter, cannot now be permitted to go back on their said representation and demand additional amount, more so with retrospective effect. Thus the impugned demand of differential supervision charges retrospectively cannot be sustained and accordingly the judgment under appeal is set aside. Appeal allowed.

Summary

Issues:
Whether the State Government can collect differential supervision charges with retrospective effect under Section 58-A of the Bombay Prohibition Act, 1949?

Analysis:
The case involved a company engaged in the manufacture of alcohol and chemicals, which was required to pay supervision charges under the Act. The State Government demanded a retrospective increase in supervision charges, leading to a legal challenge by the company. The High Court upheld the demand, prompting the company to appeal to the Supreme Court.

The main contention of the appellants was that a previous Division Bench judgment had quashed a similar demand, highlighting inconsistency in the High Court's decisions. The respondents supported the High Court's reasoning, emphasizing the legality of revising supervision charges retrospectively.

Section 58-A of the Act empowers the State Government to levy supervision charges, collected in advance each quarter. The Supreme Court deliberated on the distinction between liability to pay and quantification of charges. It noted that revising rates retrospectively did not impose a new liability but adjusted existing rates. The Court critiqued the High Court's reliance on a Single Judge's judgment that had been overruled by a prior Division Bench, indicating a lack of consistency.

Citing the M/s J.E. Bilmoria's case, the Supreme Court emphasized that retrospective imposition of supervision charges was beyond the State's authority. It highlighted the unfairness of passing on cost revisions to licensees years later, disrupting business planning and consumer pricing. The Court referenced legal principles on retrospective laws, asserting that Section 58-A did not permit retrospective cost increases.

Ultimately, the Supreme Court sided with the company, overturning the High Court's decision and allowing the writ petition. The Court concluded that the demand for retrospective supervision charges was unjustifiable, ruling in favor of the company. The appeal was allowed with no order as to costs, resolving the issue against retrospective collection of supervision charges under the Act.